Corporate Social Responsibility: Milton Friedman vs. Archie Carroll
Universität Siegenzum
Thema
„Corporate
Social Responsibility: Milton Friedman vs. Archie Carroll“
Name, Vorname:Nr.:
Telefonnummer:Mail: ************@student.uni-siegen.de,
Datum: Siegen, **.**.2014: Dr.
Contents
1. Introduction
2. The
main idea of CSR
2.1 History
of CSR
2.2 Types
of CSR
3. Profitability
of CSR
3.1 Friedman’s
Approach
3.2 Carroll’s
Approach to CSR
3.3 Measuring
of CRS
3.4 Determining
factors for CSR
4. Discussion
4.1 Position
4.2 Justification
5. Conclusion
6. References
1.
Introduction
Relevance of this
subject is that modern life constantly dictates new rules of the game. Today
the future of the companies in many respects if not generally is defined by
quality of corporate governance which is considered as one of effective ways of
increase of investment appeal of the companies and, as a result, improvement of
investment climate in the country.it is necessary to understand as corporate
governance? Whether means it system of the obligatory rules governing the relations
in sphere of action of the companies, or corporate governance implies imperious
and administrative activity of individuals, including representatives of top
management and shareholders? And whether the concepts "corporate
governance" and "management of corporation" are equivalent?the
one hand, corporate governance includes procedures of realization of the rights
of shareholders, obligations of board of directors and responsibility of his
members for made decisions, level of remuneration of top management of the
company, an order of disclosure of information and system of financial control,
on the other hand - it means activity of the state regulators and other
authorized bodies and the organizations, directed on a regulation of the
specified sphere of the relations, with the third is an activity of rating
agencies which, appropriating certain estimates, form idea of the investor of
investment appeal of the company.in essence corporate governance is a process
of search of balance between interests of shareholders and management in
particular and interests of separate groups of persons and the companies as a
whole by realization by participants of the market of a certain system of
ethical and procedural standards of the behavior accepted in business community.of
uniform approach to understanding of corporate governance in many respects is
explained by dynamism of the specified sphere. Still corporate governance in
many respects coordinated with voluntary observance by the companies’ issuers
of ethical standards and customs of a business conduct, however, gradually
there is a transition from a voluntary order to compulsory, the state role in a
regulation of separate aspects of corporate life amplifies and extends. Thus
there is a need in Corporate Social Responsibility.the last some years among
politicians and in a business environment the concept "corporate social
responsibility" (is actively used further - CSR), develops business
community of CSR strategy, creates departments of realization of the last, in
the countries of Europe open the whole scientific research institutes on
studying of this phenomenon. But, despite it, in the academic environment still
there is no uniform understanding that there is a corporate social
responsibility, what its sources as well as who governs the relations arising
in connection with the new sphere of the human relations. And what CSR is?
1
2. The main idea of CSR
in details
considering CSR, in the beginning we will define what does it means. Corporate
social responsibility (CSR, also called corporate responsibility, responsible
business and corporate social opportunities) - is the concept according to
which the organizations consider interests of society, conferring on itself
responsibility for influence of their activity on customers, suppliers,
workers, shareholders, local communities and other interested parties of the
public sphere. This obligation is beyond the obligation established by the law
to observe the legislation and assumes that the organizations voluntary take
additional measures for improvement of quality of life of workers and their
families, and also local community and society as a whole.of CSR is a subject
of numerous disputes and criticism. Defenders claim that there is a strong
economic justification of CSR, and corporations get numerous advantages of that
work for wider and long prospect, than own momentary short-term profit. Critics
argue that CSR takes away aside from a fundamental economic role of business;
one claim that it no other than reality embellishment; others say that it is
attempt to change a government role as the controller of powerful multinational
corporations.
2.1 History of CSR
term CSR traces the
roots back in the 50th years of the XX century when the American scientist H.
Bowen for the first time mentioned this perspective in the book "Social
Responsibility of the Businessman", having noted need of inclusion of a
number of social problems to the sphere of responsibility of business. Further
intensive economic development of the countries, growth of influence of
business as a whole, significantly increased interest to a question of
responsibility of business, its place and a role in social and economic life of
society.a broad sense is an influence of business on society. The organizations
which operate in the field of corporate social responsibility, define this
concept differently. At the beginning of the formation as social responsibility
understood only policy of relationship with workers, timely payment of a
salary, payment of taxes.the early seventies the largest companies of the USA
and the developed West European countries realized the social responsibility,
having decided to develop uniform values in relationship with employees and
enterprise environment. Now there is a set of treatments of the concept
"corporate social responsibility.to the most widespread, CSR - is the
concept within which the companies on a voluntary basis integrate social and
ecological policy into business activities and their relationship with all
circle of the organizations connected with the company and people.this
definition, it should be noted that CSR includes:
· responsibility
of the company in relationship with partners;
· responsibility
concerning consumers;
· responsibility
concerning the employees;
· ecological
responsibility of the company;
· responsibility
of the company before the society
2.2 Types of CSR
also should be
noted that complexity in definition of CSR results from a multi-levelness of a
basic component of the term - responsibility. The general meaning of the word
"responsibility" - is a duty to be responsible for acts and actions,
and also their consequences. As responsibility also understand consequences for
the subject in case of violation of the established requirements by it.
Proceeding from the last approach, for character of sanctions, responsibility
can be parted on legal, material, moral etc. In the majority of modern
approaches of CSR refer to ethical category and consider as moral
responsibility which in turn means a conscious and voluntary choice of the
subject of this responsibility. Despite a set of distinctions in concept CSR
definitions, these principles are put in the majority of them.has to include
two types of responsibility: obligatory and voluntary. Voluntary responsibility
assumes participation of the organization in any socially significant projects
which are not concerning directly the sphere of its action and not having
relations to results of its influence on ecological and social sphere.
Obligatory responsibility means need of the organization to be responsible
before society for consequences of the decisions and acts. In relation to
social side in CSR it is also possible to allocate two levels: internal
responsibility and external responsibility.is possible to refer responsibility
of the organization to internal CSR in the sphere of the labor and social labor
relations. Labor relations - the relations between the employer and the
employee, resulted a consent between them about performance of a certain work
by the last, recorded in the employment contract. The social labor relations -
the relations between the worker and the employer, aimed at quality providing
labor life. Proceeding from these definitions, obligatory internal responsibility
is connected with observance of the labor law, organization human development
through personnel training, medical insurance etc. It is possible to refer care
to voluntary internal responsibility about psycho-physiological health of the
employees, expressed in forming of the harmonious relations in collective,
assistance in permission of the internal conflicts, granting additional
opportunities for maintenance of a good physical form by employees etc.CSR is
the responsibility resulting activity of the organization, having consequences
for surrounding environment. It is possible to refer need of the organization
to be responsible before society for quality of goods delivered by them and
services to obligatory external responsibility; the harm done to surrounding
environment by action / inaction of the organization; results of influence on
political, economic, social spheres (in this case means, attempts of creation
of monopolies, arrangement of corporations, creation of the laws lobbying
interests of minority) etc. It is necessary to refer to voluntary external
responsibility taken by the organization of a duty for participation in
charity, sponsorship, actions for protection of the surrounding environment,
the organizations not relating directly to activity, support of the population
in crisis and emergency situations.of such corporate social responsibility are
not simply charitable business. Social responsibility has motives: for example,
development of own personal allows not only to avoid turnover of staff, but
also to involve the best experts in the market. Such actions as lead to a work
gain in productivity in the companies, improvement of image of the company, to
reputation growth. Also important aspect is publicizing of activity of the
company in mass media. CRS gives stability and stability of development of the
company in long-term prospect that is very important. As it is impossible to
forget that possibility of attraction of the investment capital for the social
and responsible companies is higher, than for other companies and as the tax
concessions. Well and the most important motivation, this preservation of
social stability in society as a whole.
2
3. Profitability of CSR
corporate
social responsibility company
After more deeply
studying of value of CSR, there is a question about the rationality in
expenditure of resources. Also there is a big deal with question about
profitability of CSR. Upon corporate social responsibility is a voluntary
contribution of business to society development in the social, economic and
ecological spheres, connected directly with primary activity of the company and
beyond the minimum defined by the law.Bowen in the book claims that the idea of
social responsibility is applicable to business as the social purposes in business
practice can bring social and economic benefits to society. But on the other
hand, those who in is aimed only at receiving profit, consider that business
should not spend money for non-core activity. Others consider that "to
live in society and to be free from society it is impossible" that it is
social investments.corporate social responsibility positively affects image of
the company that is important for PR. In the modern world the social position,
social projects have the increasing impact on reputation of the organization.
Besides, in the conditions of the competition the role plays not only favorable
image, but also idea of benefit.the one hand CSR a key to success of the
company, to its prosperity and as it is the help to the staff of corporation
and investment of capital in social programs. But on the other hand it not the
expenses necessary to business and sponsorships of projects which not making
any profit. So where is truth? For this reason there is no ambiguity and there
are several approaches for CSR.
3.1 Friedman’s Approach
I already stated
earlier, CSR in essence very difficult system and has a set of approaches. So
for example in 2011 The European Commission gives the following definition of
CSR: "Corporate social responsibility, in essence, is the concept which
reflects the voluntary decision of the companies to participate in improvement
of society and environment protection".definition of CSR offers the UN, in
the Development program where it is understood as influence of business on society.
The UN suggests to note three CSR levels where the first and second levels are
connected with performance of duties before the state and society in the form
of timely payment of taxes, salaries, the organization of new workplaces and
improvement of quality of life of staff of the organization. The third level
assumes participation of the organizations in charity.reason of a choice of
such alternative approach is obvious. Economists, representatives of the
largest business and other structures which are directly related to formation
of economic trends of the modern world became the main participants of
discussion and formation of the main definitions. Opportunity independently to
form the share in social responsibility is favorable to them. Voluntariness
also can mean and lack of CSR as that if the head of the organization considers
such policy impossible or even the harmful organization. Now in the world in
the economic sphere other approach assuming maximizing profit by a main goal of
activity of the organization was approved qualitatively.relations to CSR
problem sometimes are opposite. The Nobel Prize laureate in the field of
economy Milton Friedman categorically insisted: "There is only one and
only one social responsibility of the business world - to use the resources and
to be engaged in the activity directed on increase in profit in open free
competition without deception and fraud".
"A little that
can threaten so to bases of our free society as a consent of leaders of
corporations to assume other social responsibility, except that which consists
in earning money for the shareholders", - Milton Friedman noted. his
opinion, social responsibility can be reduced to receiving by the profit
company. For the modern company it is enough that its activity was coordinated
with the general principles of environment protection, health and the safety,
all other social programs only will lead to excessive expenses.position of
corporate egoism is shared not only by the Nobel winner economist, but also by
the marketing specialist Theodore Levitt. For the first time market forces in
discussion of a subject of social responsibility of business mentioned Levitt.
He wrote that “one (main) responsibility of business - aspiration to material
benefit, and another - following to elementary canons of daily civilized
communication, such as honesty, integrity etc. But in the same time the
development of schools, hospitals and social services, Levitt criticized as the
concept which broad application conducts to death of capitalism, threat to
business and the market as a whole.
3.2 Carroll’s Approach to CSR
integrated approach
was developed by scientists, L. Preston, J. Post, A. Carroll. Top integrated
approach is treatment of A. Carroll who gave the definition of CSR in the future.Carroll,
Corporate Social Responsibility is understood "as compliance of activity
of the organization economic, to the legal and discretionary (philanthropic)
expectations shown by society the organizations during this period of
time"bit later Carroll specified the definition as follows: "CSR
represents multilevel responsibility which can be presented in type of a
pyramid. Professing CSR firm has to seek to get profit, to execute laws, to be
ethic, and also to be the good corporate citizen"
Figure 1
Carroll’s Pyramide Source: Nalband A. & Kelabi, S. (2014), p.236.
is necessary to
distinguish approach of A. Carroll and M. Schwartz who offered system approach
to CSR from many researchers of this phenomenon. CSR, from the point of view of
A. Carroll, is public expectations in relation to the concrete organization in four
various spheres: economic, legal, ethical and philanthropic.in the basis of a
pyramid of Carroll economic responsibility means a direct obligation of the
organization in the market as the producer of goods and services to satisfy any
needs of consumers and, thus, to take and the profit.responsibility means need
of law-abidingness of business in the conditions of market economy, compliance
of activity of the company to those expectations of society which are recorded
in rules of law. Ethical responsibility demands from business practice of the
organization of compliance to those expectations of society which aren't
stipulated in rules of law, but are based on existing norms of morals.or
discretionary responsibility induces firm to the charitable actions directed on
assistance to needing, including at implementation of social programs.A.
Carroll, developing the complex concept, offered the CSR model which included
three measurements:
· corporate
social responsibility - possible levels: economic, legal, ethical,
discretionary;
· corporate
social susceptibility - the range of changes from jet to the pro-active: jet,
defensive, adaptive and pro-active;
· relevant
public problems - environmental protection, safety product, discrimination,
safety of workplaces, interaction with shareholders and so on.Carroll's Pyramid
with M. Schwartz's support was transformed to the three-side model where as the
main types of responsibility, were allocated economic, legal and ethical. In an
ideal any organization has to combine all three spheres, the CSR real level of
concrete firm depends on variations of these combinations.approach disproves
possibility of treatment of responsibility only as categories of morals as
includes the questions which are not assuming existence of consent/disagreement
of concrete firm and voluntariness of participation in them, and assumes at
least two levels - obligatory and voluntary responsibility.development of idea
of multidimensional CSR, continued with the model which were developed by S.
Wartick and P. Cochran, where they put emphasis on the corporate social
performance (CSP). Thus they leaned on Carroll's three-dimensional model, but
to Carroll's each measurement they gave they own names: principles, process and
policy.social activity represents fundamental interrelation between the
principles of social responsibility, process of a social susceptibility and the
policy directed on the solution of public problems.
3.3 Measuring of CRS
. Wood offered the
following model of measuring of the CSR:
. Principles
of social responsibility
. Processes
of a social responsiveness
. Results of
corporate behavior:of CSR:
· Institutional
principle of legitimacy: society provides to business legitimacy and allocates
it with the power. In long-term prospect this power is lost by those who, from
the point of view of society, doesn't use it responsibly.
· Organizational
principle of public responsibility: the organizations in business are
responsible for those results which belong to areas of their interaction with
society.
· Individual
principle of freedom of an administrative choice: managers are moral agents. In
each area of corporate social responsibility they are obliged to use a freedom
of choice available for them for achievement social responsible results.of a corporate
social susceptibility:
· Assessment
of the environment of business.
· Management
of interested parties (stakeholders).
· Management
of problems.of corporate behavior:
· Impact
on society.
· Social
programs.
· Social
policy.
3.4 Determining factors for CSR
volume and nature
of advantages of CSR for the organization can differ depending on character of
the enterprise and difficult gives in to quantitative measurement though there
is the extensive literature convincing business to take not only financial
measures (for example, Deming’s "Fourteen points, the Balanced system of
indicators" ). However business cannot be guided by short-term financial
results of activity when developing the strategy of CSR. Definition of CSR used
in the organization can differ from accurate definition "impacts on
interested parties",used by many defenders, and often includes charitable
and voluntary actions. The CSR function can be created in department of the
stuff, development of business or in department of organization public
relations, or can be transferred to separate division, or in certain cases -
directly to board of directors. Some companies can use similar CSR of value
without accurately certain team or the program.the heart of the correct and
profitable work of corporation, social programs lie generally. Activities of
corporate governance and types of social programs it is possible to divide into
the following:
· The
administrative/social budget - the financial means allocated by the company for
implementation of own social programs.
· The
corporate code - this formal statement of values and the principles of business
relations of the companies, and sometimes and her suppliers and business
partner. To contain in the code the declared minimum standards and them to
observe the guarantee of the companies and as to demand observance of these
standards from the suppliers, contractors, subcontractors and licensees. The
code is not the law therefore is obligatory only for those who undertook to
observe them.
· Mission
of socially responsible company - is officially formulated position of the
company concerning the social policy.
· Priorities
of social policy of the company - it is the main directions of realization of
social programs of the company recorded in a documentary type.
· Social
programs - activities voluntary carried out by the company for conservation,
personnel development, work creating favorable conditions, support of local
community, charity and conscientious business practice. Thus the main criterion
is compliance of programs to the purposes and to strategy of development of
business
· Social
activity of the company is expressed in carrying out various social programs
both internal, and an external orientation. Distinctive features of programs of
social activity are voluntariness of their carrying out, system character and
coherence with mission and strategy of development of the company.
3
4. Discussion
.1 Position
if to speak about
corporation profit, it is possible to be sure that CSR application only
positively influences the income? Probably that there are also negative sides
of social responsibility, and after reading Baker’s article we can find them
as:
· Violation
of the principle of maximizing arrived. The direction of part of resources on
social needs reduces influence of the principle of maximizing profit. The
enterprise behaves in the greatest measure socially responsibly, concentrating
only on economic interests and leaving social problems to public institutions
and services, to charitable institutes and educational organizations.
· Expenses
on a social involvement. The funds allocated for social needs, are expenses for
the enterprise. Eventually, these expenses are transferred to consumers in the
form of rise in prices. Besides, the firms participating in competitive fight
in the international markets with firms of other countries which do not incur
costs of social needs, appear in adverse situation in the competition.
· Insufficient
level of the reporting to general public. As managing directors do not elect,
they are not accountable to general public. The market system well controls
economic indicators of the enterprises and badly their social involvement.
Until society will not develop an order of the direct reporting to it the enterprises,
the last will not participate in social actions for which they do not consider
themselves responsible.as the main thing, questions of protection of
surrounding environment have to become one of priorities and obligations of
corporations as the damage from consequences of activity of corporations is
difficult renewable. It is possible to carry to the most known ecological
disasters of the last time:
· 1994
- leakage of toxic gases at plant on production of pesticides of the Union
Carbide company in Bhopal (India) as a result of which more than 22 000 people;
· 2010
- explosion on the oil Deepwater Horizon platform located in the Gulf of Mexico
and operated by the BP company. About 25 000 tons of oil poured out to the open
ocean. Pollution of the area of a surface of the water of the Gulf of Mexico
made 1543 thousand sq.km. The damage is caused to more than 400 animal species
of the water area of the Gulf of Mexico, 8 national parks, 25 reserves.
Implicit, but dangerous result became - emergence on a water surface of the
microfilm reflecting an ultraviolet and stirring air circulation.
· 2011
- a fire on the Fukushima plant-1 constructed and operated by the Tokyo energy
company, the entailed pollution of an ecosystem by radio nuclides with the
consequences postponed in time.
· 2011
- 350 tons of oil poured out at coast of New Zealand from the tanker which has
run aground.the description of such accidents it is possible to add and simply
irresponsible behavior of large corporations, so we can take one of the largest
Russian corporation, “Norilsk Nickel MMC” which blows gas in to the atmosphere
that made for 2009 of 979 thousand tons of sulfur which is 25% of all Russian
industrial emissions. Besides sulfur, it is also established nickel, copper,
cobalt, arsenic to get to the atmosphere.extent of influence and impact on an
ecosystem and society as a whole assumes high degree of responsibility for made
decisions the management of the organizations and has to exclude especially
voluntary approach to CSRnot all unfortunately resort to corporate social
responsibility because of the good purposes. So for example Some critics
believe that the CSR programs are realized by such companies as British
American Tobacco (BAT), the oil giant of BP (well-known the noticeable
advertising campaigns in the field of ecological aspects of the activity) and
McDonald’s, for public attention derivation from the ethical questions
connected with their primary activity. They claim that some corporations begin
the CSR programs for the sake of commercial advantages which they will get
thanks to increase of the reputation in the opinion of the public or the
government.
4.2 Justification
organization is the
open system which is actively interacting with environment. It exists in
society, thanks to society, using the resources belonging to society that in
turn demands forming of the harmonious relations between part which the
organization, and whole is. Corporate social responsibility can become that
principle of existence of the organizations which shall be able to remove
contradictions between modern economy and morals, business and the
person."Making Good Business Sense" report, Lord Richard Holm and
Phil Watts, uses the following definition for CSR:
"Corporate
social responsibility is a constant commitment of business to run business on
bases of ethics and to make the contribution to economic development, at the
same time improving quality of life of the workers and their families, as well
as societies as a whole".paper of the European Union defines corporate
responsibility as "the concept within which the companies on a voluntary
basis integrate social and ecological policy into business of operation and
their relationship with all circle, the organizations connected with the company
and people". Such approach is accepted by the majority of the countries of
the European Union.we can see, for today there is no uniform approach to
definition of corporate social responsibility. However all presented points of
view are uniform in one: corporate social responsibility is responsibility of
the company before all people and the organizations which it faces in the
course of activity, and before society as a whole. And researchers include all
associations of businessmen here:
· responsibility
of the company in relationship with partners,
· responsible
policy concerning workers,
· ecological
responsibility,
· responsibility
of the company before society as a whole
4
5. Conclusion
Summing up the
results, there is a wish to allocate especially prospects of development of
model of social partnership. Soon, obviously, it is necessary to expect
improvement of structure of system of the tripartite social and labor relations
- workers, employers; contents of interaction of subjects of social
partnership; development of existing functions and their distribution out of
limits of the sphere of labor relations.is a process of social partnership
though slowly, but develops that, undoubtedly, has a positive effect. In the
international understanding corporate social responsibility of CSR is treated
as a voluntary contribution of business to society development in the social,
economic and ecological spheres, connected directly with primary activity of the
company and beyond the minimum defined by the law.significant questions stand
long ago in public attention center therefore the companies try to behave in
process of forces well, without stepping on sick callosities to public opinion.
Social, charity of the company can be the additional positive characteristic at
relationship with the government and financial institutions, with partners,
promotes setting of new communications.
In the right of
each company and corporation on the to treat approach of corporate
responsibility. After all there are some approaches to this phenomenon and not
all of them are positive to corporate social responsibility. But nevertheless
it is necessary to understand that in modern society where there is a huge
number of mass information and a mussel, the social help, sponsor's support,
deliveries of grants will always go on the benefit not only to society, but as
also to the companies.is important as that social activity is a form of
preservation of a reputation and glory for descendants.
6. References
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M. (23 May 2008): “Arguments against Corporate Social Responsibility” Business
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(abgerufen 20.06.2014)
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73
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Readings
· Brand
Strategy (2007): “10 key things to know about CSR” London
· Bowen,
H. R. (1953): “Social Responsibilities of Businessman” New York
· Corporate
Social Responsibility: <http://csr.com/about/social-responsibility>
· Mane, H.G.
(24 November 2006): “Milton Friedman was Right“, The Wall Street Journal.
Selbstständigkeitserklärung
Hiermit versichere ich, dass ich die vorliegende Arbeit
selbstständig verfasst und keine anderen als die angegebenen Quellen und Hilfsmittel
benutzt habe, insbesondere keine anderen als die angegebenen Informationen aus
dem Internet.
Der Speicherung meiner Seminararbeit zum Zweck der
Plagiatsprüfung stimme ich zu. Ich
versichere, dass die elektronische Version mit der gedruckten Version inhaltlich
übereinstimmt. Mir ist bewusst, dass Plagiarismus zum Nichtbestehen der
Arbeit führt.auf der Homepage zum Download
bereitgestellten „Formalen Gestaltungshinweise“ habe ich zur Kenntnis
genommen., den 03.07.2014 __________________, Datum Unterschrift